The UK’s private rental sector (PRS) is heading into 2025 with signs of stabilisation and strategic opportunities for landlords, according to Allison Thompson, National Lettings Managing Director at Leaders Romans Group (LRG). Slowing rental inflation, evolving tenant preferences, and upcoming legislative changes are shaping a pivotal year for landlords and tenants alike.
Rental inflation slows but demand remains strong
Rental inflation has begun to cool, averaging 3-4% for new lets, as affordability pressures limit how much tenants can pay. While this moderation reflects renters’ stretched budgets, high demand for rental properties persists, particularly in regions with limited housing stock. Thompson noted:
“Renters’ budgets are beginning to limit how much rents can rise. Despite this moderation, high demand persists, especially in regions with limited rental stock, positioning landlords with well-maintained properties to benefit from stable rental yields.”
Even with a gradual slowdown in rent increases, the PRS remains a vital housing option for those unable or unwilling to buy.
Landlord strategies shift toward sustainability
Landlords are navigating a changing landscape, with around 12% of current property sales coming from landlord disposals. However, Thompson described this as a “controlled exit” rather than a mass departure from the sector. Many landlords are adjusting their portfolios to meet evolving tenant demands, including a growing interest in energy-efficient homes.
“Many landlords are seizing the chance to adapt, whether by modernising properties to meet growing tenant interest in energy-efficient homes or adjusting portfolios in line with potential new energy regulations,” Thompson said.
Energy performance standards are becoming an increasing focus, with landlords preparing for proposed requirements to achieve an EPC rating of ‘C’ or above by 2030. Thompson added:
“Although these changes are not due to come into effect until 2030, landlords will be considering how these changes affect their plans over the interim period. While these changes are intended to improve housing standards, we do need to consider the impact they could have on the sector over the long term.”
The impact of legislative changes
The anticipated Renters’ Rights Bill (RRB), which is expected to bring significant changes to the sector, introduces some uncertainty for landlords. While the specifics of the bill remain unclear, its rollout is likely to influence the market progressively.
Thompson also highlighted the stabilisation of mortgage rates, now hovering in the low 4% range, which is easing affordability pressures on homebuyers. This could lead to a gradual increase in first-time buyer numbers, potentially softening rental demand over time. However, the PRS will remain indispensable for those who are not yet ready to purchase, ensuring ongoing demand for rental properties across the UK.
“The Private Rented Sector remains indispensable, providing accessible housing for those not yet ready to buy and ensuring continued demand for rental properties across the UK,” Thompson emphasised.
Navigating 2025 and beyond
As landlords prepare for 2025, the focus is on balancing tenant demand, regulatory requirements, and sustainability. Those willing to invest in energy-efficient upgrades and adapt to new legislation are well-positioned to thrive in a stabilising market.
The question now is how quickly landlords and tenants can adapt to these shifting dynamics. Will the Renters’ Rights Bill and energy efficiency regulations bring the desired improvements, or could they unintentionally disrupt the market? For now, the PRS is set to play a critical role in the UK’s housing landscape, providing both challenges and opportunities for landlords who plan strategically.
